Furnished Holiday Lettings: What Changed in 2025
The Furnished Holiday Lettings (FHL) regime was abolished from April 2025 — what that means for holiday-let owners, the reliefs you've lost, and how holiday lets now sit within MTD for property.
The short answer
From 6 April 2025 the Furnished Holiday Lettings regime was abolished, so holiday lets are taxed like any other property business. Owners lost FHL perks such as full mortgage-interest deductibility, capital allowances on furnishings, and certain Capital Gains Tax reliefs. Holiday-let income now forms part of your ordinary UK (or foreign) property business for MTD.
If you own a holiday let, 2025 brought a big change: the Furnished Holiday Lettings (FHL) regime was abolished. Here's what you've lost and how holiday lets are taxed now.
What changed
From 6 April 2025, the special FHL rules ended. Holiday lets are no longer a distinct category — they're taxed as part of your ordinary property business, the same as a standard buy-to-let.
The reliefs that have gone
FHLs used to enjoy several perks that ordinary lettings don't. The main losses:
| Old FHL benefit | Now |
|---|---|
| Full mortgage-interest deduction | 20% finance-cost tax credit only (like other landlords) |
| Capital allowances on furniture/equipment | Replacement-of-domestic-items relief instead |
| Business Asset Disposal Relief on sale | Generally not available for the letting |
| Rollover/gift reliefs (CGT) | Generally lost |
| Profits counting for pension relief | No longer treated as relevant earnings |
What stays the same
- Ordinary running costs — cleaning, management fees, insurance, repairs, utilities — remain allowable expenses.
- You still report rental profit and pay income tax on it.
- Replacement of domestic items (like a worn-out sofa or fridge) can still be claimed under the standard relief.
Holiday lets under MTD
For Making Tax Digital, holiday-let income is simply part of your property business:
- UK holiday lets combine into your UK property business;
- Overseas holiday lets go into your foreign property business;
- the income counts toward your MTD threshold like any rental income.
So if your combined gross rental income (holiday lets included) is over the threshold, you're in MTD and file the usual quarterly updates and final declaration.
What to do
- Revisit your mortgage-interest position — you're now on the 20% credit.
- Check whether replacement-of-domestic-items relief covers your furnishings spend.
- Fold holiday-let figures into your property business record-keeping for MTD.
- If you were relying on FHL CGT reliefs for an exit plan, get advice.
Key takeaways
- The FHL regime ended on 6 April 2025.
- Holiday lets are now taxed as ordinary property — losing full interest relief, capital allowances and some CGT reliefs.
- Running costs stay allowable; replacement-of-domestic-items relief applies.
- Holiday-let income is part of your property business for MTD.
This article is general information, not tax advice. Check the current position at gov.uk or speak to your accountant.
Frequently asked questions
Is the Furnished Holiday Lettings regime still available?
No. The FHL tax regime was abolished from 6 April 2025. Properties previously treated as FHLs are now taxed as part of your ordinary UK or overseas property business.
What reliefs have holiday-let owners lost?
The main losses are full mortgage-interest deductibility (now the 20% finance-cost credit like other landlords), capital allowances on furniture and equipment (replaced by replacement-of-domestic-items relief), and access to certain CGT reliefs such as business asset disposal relief and rollover relief on the letting.
Do holiday lets fall under MTD?
Yes, as part of your property business. UK holiday lets combine into your UK property business and overseas ones into your foreign property business, and count toward the MTD income threshold like any other rental income.
Can I still deduct cleaning, management and running costs?
Yes. Ordinary running costs of letting — cleaning, management fees, insurance, repairs, utilities — remain allowable expenses under the normal property rules.
Related reading
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